M&A in a ‘holding pattern’? Now is the time to get your head around the branding implications.

As a result of the global downturn, a considerable number of planned M&As have been put into a ‘formation holding pattern’ pending market recovery. Some have since been permanently shelved, but many are still out there cowering below decks with the hatches battened down, waiting for calmer waters and the chance to fly the flag and sail forth.

While the timing to resurrect interest in M&A deals is at present very much a crystal ball gazing exercise, potential merger partners would do well to take the time to focus on the frequently ignored branding requirements of the merger. After all, your M&A is all about creating future value for the merged entity – value that is greater than that of the merging parties combined – value that is very dependent on your brand’s strength and ability to adapt to change. Yet it is taking decades of miserable M&A performance for the penny to drop and corporate motivation to be balanced with brand motivation.

The lack of success in M&A deals is staggering – McKinsey and Company state that 80% of mergers fail to earn back the cost of the deals. Where else in business would such low performance be tolerated? Arrogance and emotions are contributing factors to the failures, difficulties in agreeing on a name to take the new entity forward and concerns from employees on the viability and longevity of the ‘deal’. It is understandable that company owners can be highly protective of their prized possession which diverts them from making sensible and objective decisions.

The surviving name is a critically important consideration, particularly to satisfy investors, business partners, regulators, clients, employees and suppliers – a not insubstantial and critical audience! There are many other considerations that relate to the brand. How do you ensure that you don’t rock the client boat and lose their confidence? How do you communicate solid rationale for your decision not only for the name but for the way you intend to navigate the brand forward? What’s the new vision? How are you going to handle two sets of values, two sets of customers and two sets of employees? How are you keeping customers and employees informed while the process unfolds? What if the brand architecture needs to be modified or rationalised, particularly where there are complex group structures and subsidiary businesses, particularly where they reside in more than one country?

Our experience at Heywood Innovation is that employee disengagement can easily cause the merger to founder. Inadequate communication on merger rationale and progress, absent leadership, lack of focus and vision for a brave new future, and inconclusive discussion and agreement on new goals can all conspire to reduce the deal’s potential for success.

The CEO and management team must be highly visible as the champions of the new brand before, during and after the deal is cemented. The brand should be portrayed as a symbol of unity and an opportunity for employees, a reaffirmation of market strength for investors and an emotional re-charge for customers.

The fact that many M&As have been put on hold will only serve to dilute confidence. When markets recover, the decision to press ahead must be accomplished with great conviction and confidence. Now is your chance to give serious consideration to the branding implications before the storm subsides, money starts to flow and M&As once again become the flavour of the month.

Tony Heywood is a Fellow of the Design Institute of Australia, founder of Heywood Innovation in Sydney Australia and joint founder of BrandSynergy in Singapore.

View some of Heywood’s work at www.heywood.com.au